In June 2025, Tanzania’s national debt reached TZS 116.6 trillion (USD 45.4 billion), a 13.5% increase from TZS 102.8 trillion in June 2024, driven by external borrowing (70.7% of total, TZS 82.4 trillion) for infrastructure and fiscal deficits. The Tanzania Shilling (TZS) depreciated by 9.6% year-on-year against the USD (2,569.46 TZS/USD), raising external debt servicing costs (USD 1–2 billion annually), despite robust reserves of USD 5,307.7 million (4.3 months of import cover). Supported by tourism receipts (USD 7,104 million) and a moderate debt-to-GDP ratio (~44.3%), Tanzania’s debt and TZS remain sustainable in the short term, but import reliance and USD exposure (67.6% of external debt) pose long-term challenges.

Tanzania National Debt Overview (June 2025)

Tanzania’s national debt encompasses public debt (domestic and external) and private sector external debt, critical for assessing fiscal sustainability. The attached document and provided data offer insights into debt stock, composition, and servicing, which are analyzed below.

• Total National Debt:
  • Value: TZS 116.6 trillion (USD 45.4 billion at 2,569.46 TZS/USD).
  • Annual Increase: +13.5% from TZS 102.8 trillion (USD 43.8 billion at 2,345.38 TZS/USD) in June 2024.
  • Context: The document notes the national debt stock at USD 45,586.6 million (~TZS 117.1 trillion) in June 2025, aligning closely with the provided TZS 116.6 trillion. The 13.5% increase reflects increased borrowing for infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and fiscal deficits (2.5% of GDP in 2024/25). Earlier data shows USD 48,479.9 million in April 2025 and USD 48,217.0 million in February 2025, suggesting a slight decline by June due to repayments or exchange rate effects.
  • Debt-to-GDP Ratio: Estimated at ~44.3% based on a GDP of ~USD 102.6 billion (2022 GDP of USD 105.1 billion, adjusted for 5.6% growth in 2024 and 6% in 2025). The IMF’s 2024 Debt Sustainability Analysis (DSA) reports a public debt-to-GDP ratio of 35%, below the 55% benchmark for low-income countries, indicating moderate distress risk. However, World Economics estimates a higher GDP (~USD 155.5 billion), implying a lower ratio of ~29.2%, highlighting data variability.
  • Implications: The 13.5% debt increase supports growth-enhancing projects but raises servicing costs (~40% of government expenditures, per IMF). The moderate debt-to-GDP ratio suggests sustainability, but TZS depreciation (9.6% against USD) increases external debt burdens.
• Domestic Debt:
  • Stock: TZS 35.5 trillion (USD ~13.8 billion, 29.3% of total debt).
  • Annual Increase: +11.1% from TZS 32.0 trillion in June 2024.
  • Monthly Increase: +0.9% from May 2025 (~TZS 35.2 trillion, based on April 2025’s TZS 34,759.9 billion).
  • By Instrument:

By Creditor:

• Context: The document confirms TZS 85.9 billion raised via bonds in June 2025, with TZS 93.96 billion spent on debt service (TZS 60.13 billion principal, TZS 33.83 billion interest, correcting the document’s typo of TZS 276.8 billion). The 11.1% annual growth reflects financing of fiscal deficits (e.g., TZS 270.2 billion in May 2025 for Mainland Tanzania). Treasury bonds’ 83.2% share aligns with a shift to long-term instruments, reducing refinancing risks.
• Implications: The diversified creditor base (28.6% banks, 26.1% pension funds) and long-term bond dominance enhance stability, but high borrowing rates (15.5% lending rates) crowd out private sector credit, which weakened in Q4 2024. The document’s note on retail investor participation via TIPS (18.1% “Others”) supports financial inclusion.
• External Debt:
  • Stock: TZS 82.4 trillion (USD 33.0 billion, 70.7% of total debt).
  • Annual Increase: +14.8% from TZS 71.8 trillion (USD 30.6 billion) in June 2024.
  • By Borrower:

By Use of Funds:

By Currency:

• Context: The document’s tables (e.g., Table 2.2, 2.3, 2.4) confirm the external debt stock and composition, with USD 109.9 million disbursed in April 2025 for projects like SGR and TAZARA Railway (25.4% transport). The 14.8% increase reflects concessional loans (e.g., IMF’s USD 441 million ECF/RSF, World Bank’s USD 527 million) and non-concessional borrowing (34% of external debt). The 67.6% USD share amplifies risks from the 9.6% TZS depreciation.
• Implications: The central government’s 85.4% share aligns debt with development priorities (e.g., Vision 2050), but low industry (4%) and agriculture (6.5%) allocations limit structural transformation. High USD exposure increases servicing costs (USD 80.9 million in April 2025), with external debt service at ~2.89% of GNI in 2023.
• Debt Servicing:
  • Domestic: TZS 93.96 billion in June 2025 (TZS 60.13 billion principal, TZS 33.83 billion interest), per the document. Annual servicing was TZS 890.9 billion in February 2025 (TZS 609.9 billion principal, TZS 281 billion interest).
  • External: USD 80.9 million in April 2025, with annual estimates of USD 1–2 billion, driven by USD-denominated debt (67.6%) and TZS depreciation.
  • Context: Servicing absorbs ~40% of government expenditures, per IMF, straining fiscal space. Concessional loans (e.g., World Bank, 48% of external debt) mitigate costs, but non-concessional borrowing raises concerns.
  • Implications: High servicing costs limit development spending (33.7% of Zanzibar’s budget), necessitating revenue mobilization (TZS 2,689.2 billion in May 2025, 3.1% above target) and export growth.

Tanzania Shilling (TZS) Sustainability

The TZS’s sustainability is assessed through its exchange rate stability, depreciation trends, and impact on debt servicing, drawing from the provided data and document’s external sector insights (e.g., Charts 2.7.1–2.7.3, Table 2.7.1).

• Exchange Rate Performance:
  • USD/TZS (IFEM):
    • June 2024: 2,345.38
    • May 2025: 2,565.08
    • June 2025: 2,569.46
    • Annual Depreciation: -9.6%
    • Monthly Change: -0.2% (May to June 2025)
  • Bureau de Change:
    • Buying Rate: 2,574.33 TZS/USD
    • Selling Rate: 2,582.67 TZS/USD
  • Other Currencies:

• Context: The document notes improved IFEM liquidity in June 2025, driven by seasonal cash crop exports (e.g., cashew nuts, tobacco) and gold exports (USD 3,369.7 million annually). The 9.6% depreciation aligns with earlier trends (9% in 2024, 8% in 2023), but a slight 0.28% appreciation in October 2024 and 2.6% by January 2025 indicate periods of stability. The BoT’s USD 7 million intervention in January 2025 and reserves of USD 5,307.7 million (4.3 months of import cover) support orderly markets.
• Drivers:
  • Import Demand: Goods imports rose to USD 459.5 million in Zanzibar and USD 13,040.7 million for Tanzania (Table A7), driven by capital goods (e.g., SGR, hydropower).
  • Export Shortfalls: Zanzibar’s exports fell to USD 150.3 million (-11.9%), with cloves down 27.2%. Tanzania’s goods exports grew to USD 1,036 million (Table 2.7.1), led by gold and cereals (USD 501.3 million), but were insufficient to offset imports.
  • Global USD Strength: U.S. monetary tightening increased USD demand, impacting emerging market currencies like the TZS.
• Implications: The 9.6% depreciation raises import and debt servicing costs, contributing to inflation (3.4% in Zanzibar, 3.2% in Mainland). The narrow Bureau spread (0.3%) and low dollarization (3.2% of Mainland businesses use USD) indicate market confidence, but sustained depreciation pressures reserves.
• Forex Market Activity:
  • IFEM Volume: USD 65.4 million in June 2025, +12.6% from USD 58.1 million in May 2025 (document, Page 10). This reflects trade settlements and seasonal imports, compared to USD 95.7 million in December 2024.
  • Reserves: USD 5,307.7 million (Chart 2.7.1), covering 4.3 months of imports, down slightly from USD 5,323.6 million in January 2025 but sufficient per IMF’s 4-month threshold.
  • Implications: Increased IFEM activity signals robust demand, but reserves and BoT interventions (e.g., USD sales) ensure stability. Service receipts (USD 7,104 million, driven by tourism’s 10% arrival increase to 2,333,322) bolster forex inflows.
• TZS Sustainability:
  • Stability: The TZS’s “orderly and market-driven” performance (document, Page 10) and minimal monthly depreciation (-0.2%) indicate short-term stability, supported by reserves and interventions.
  • Risks: The 9.6% annual depreciation and high USD debt exposure (67.6%) increase servicing costs, with external debt service at USD 1–2 billion annually. Import reliance (USD 13,040.7 million) and export volatility (e.g., cloves) strain reserves.
  • Mitigating Factors: Tourism receipts (USD 7,104 million), FDI (USD 3.7 billion), and concessional financing (e.g., IMF’s USD 441 million) support forex inflows. The BoT’s 6% Central Bank Rate (Page 7) controls inflation (3%–5% target), stabilizing the TZS.
  • Implications: The TZS is sustainable in the short term, but long-term pressures from depreciation and import growth require export diversification (e.g., cereals, manufactured goods) and reserve accumulation.

Debt and TZS Sustainability Metrics

Key Insights and Policy Implications

1. Debt Sustainability:
   • Status: The TZS 116.6 trillion debt (44.3% of GDP) is sustainable per the IMF’s DSA (below 55% benchmark), with moderate distress risk. External debt’s 70.7% share and 14.8% growth support infrastructure (25.4% transport) but increase servicing costs (USD 1–2 billion annually).
   • Policy: Prioritize concessional financing (e.g., World Bank’s USD 527 million) and revenue mobilization (TZS 2,339.2 billion tax revenue in May 2025, 4.1% above target) to reduce non-concessional borrowing (34% of external debt).
2. TZS Sustainability:
   • Status: The 9.6% depreciation and stable monthly performance (-0.2%) indicate short-term TZS stability, supported by reserves (USD 5,307.7 million) and tourism receipts (USD 7,104 million). However, import reliance and USD debt exposure pose long-term risks.
   • Policy: Boost exports (e.g., cereals, USD 501.3 million; manufactured goods) via AfCFTA and diversify debt currencies to mitigate USD risks (67.6% share).
3. Debt-TZS Nexus:
   • Impact: TZS depreciation increases external debt servicing costs, with USD 22.3 billion (67.6%) in USD-denominated debt. This contributes to inflation (3.4% in Zanzibar) and fiscal pressure.
   • Policy: Strengthen reserves through FDI (USD 3.7 billion) and tourism (2.3 million arrivals) to stabilize the TZS and reduce servicing costs.
4. Economic Context:
   • Growth: 5.6% GDP growth in 2024 and 6% projected for 2025 support debt absorption, driven by tourism and infrastructure.
   • Risks: TZS depreciation, global USD strength, and export volatility (e.g., cloves -27.2%) threaten sustainability. Climate shocks and election uncertainties (October 2025) add risks.
   • Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (TIPS, 453.7 million transactions) enhance fiscal and TZS resilience.

Critical Examination of the Establishment Narrative

• Debt Optimism: The BoT and IMF emphasize sustainability (35% debt-to-GDP), but the 13.5% debt increase and 9.6% TZS depreciation raise servicing concerns, especially with USD debt (67.6%). The IMF’s moderate risk rating may understate long-term vulnerabilities if exports (e.g., cloves) or tourism falter.
• TZS Stability: The BoT’s “orderly market” narrative (Page 10) is supported by reserves and interventions, but high import demand (USD 13,040.7 million) and global USD strength challenge long-term TZS sustainability. X posts on regional debt (e.g., Kenya’s unsustainable levels) suggest broader risks.
• Crowding Out: The narrative overlooks domestic borrowing’s crowding-out effect (15.5% lending rates), limiting private sector credit (12.8% growth in January 2025) and Vision 2050’s private sector-led goals.

Between 2021/22 and 2025/26, Tanzania's debt service costs surged by 42–58%, from an estimated TZS 9–10 trillion to a confirmed TZS 14.22 trillion—now accounting for 25.2% of the national budget (TZS 56.49 trillion). Over this period, total public debt rose to approximately 46% of GDP, driven largely by external borrowing, which reached USD 33.9 billion in 2025/26 and remains 67.7% USD-denominated, exposing the country to exchange rate risks, especially following a 2.6% shilling depreciation in 2024/25. Domestic debt also expanded significantly to TZS 34.26 trillion, with the majority held by commercial banks and pension funds. Despite a stabilizing debt-to-GDP ratio and a manageable debt service-to-GNI ratio of 2.89% (2023), the growing reliance on non-concessional and foreign currency debt underscores fiscal vulnerabilities that require prudent debt management strategies to ensure long-term sustainability.

Escalating Service Costs

Tanzania's debt servicing landscape has undergone significant transformation over the past five years, reflecting the country's economic growth trajectory and evolving fiscal priorities. The most striking development is the substantial increase in debt service costs, which have risen from an estimated TZS 9-10 trillion in 2021/22 to TZS 14.22 trillion in 2025/26 – representing a 42-58% increase over the five-year period.

Key Performance Indicators at a Glance:

• Current Debt Service (2025/26): TZS 14.22 trillion (25.2% of national budget)
• Total Public Debt: Approximately 46% of GDP (2025/26)
• External Debt: USD 33.9 billion (67.7% USD-denominated)
• Domestic Debt: TZS 34.26 trillion
• Debt Service-to-GNI Ratio: 2.89% (2023 data)
• Five-Year Growth in Debt Service: 42-58% increase

Detailed Year-by-Year Analysis

2021/22 Financial Year: Foundation Period

The 2021/22 period established the baseline for Tanzania's modern debt management framework. With debt service costs estimated at TZS 9-10 trillion, the government maintained a relatively moderate debt burden at 43.6% of GDP. The debt composition showed a balanced approach with domestic debt at 15.9% of GDP and external debt forming the larger portion. Notably, domestic arrears stood at a manageable 1.8% of GDP, indicating effective short-term debt management.

The present value debt-to-GDP ratio of 31% remained well below the 55% benchmark, positioning Tanzania in the low-to-moderate debt distress risk category. External borrowing was predominantly concessional, reducing the overall cost burden and exchange rate exposure.

2022/23 Financial Year: Strategic Expansion

The government allocated TZS 9.1 trillion for debt servicing within a total budget of TZS 44.4 trillion, with TZS 7.4 trillion successfully disbursed by April 2023. This period marked a strategic shift as public debt increased to 45.7% of GDP (46.7% including domestic arrears), reflecting increased infrastructure investment.

External debt composition rose to 63.3% of total debt, indicating a pivot toward international financing for development projects. The shift toward non-concessional borrowing began during this period, driven by infrastructure financing needs. Despite this increase, the present value debt-to-GDP ratio remained sustainable at 31.8%.

2023/24 Financial Year: Acceleration Phase

Debt servicing allocation reached TZS 10.48 trillion, representing a 15% increase from the previous year. This increase occurred within a Ministry of Finance budget of TZS 15.94 trillion, highlighting debt service as a major fiscal priority. Total public debt climbed to 47.36% of GDP, with external debt reaching USD 30.533 billion by July 2023.

The debt structure showed concerning trends with external debt comprising 73% of total obligations, significantly increasing Tanzania's exposure to exchange rate fluctuations. Total national debt reached approximately TZS 69.44 trillion in 2022, continuing its upward trajectory through 2023.

2024/25 Financial Year: Consolidation Efforts

Debt service costs are estimated at TZS 11-12 trillion within a national budget of TZS 49.35 trillion. External debt peaked at USD 32.89 billion in September 2024, subsequently reaching USD 33.905 billion by January 2025. The central government held 78.1% of external debt, indicating concentrated fiscal responsibility.

Domestic debt stabilized at TZS 32.62 trillion in September 2024, with Treasury bonds dominating at 78.9% of domestic obligations. The debt-to-GDP ratio showed signs of stabilization, with projections indicating a gradual decline to 40.84% by 2029, suggesting improved debt sustainability measures.

2025/26 Financial Year: Current Trajectory

The current budget allocation confirms TZS 14.22 trillion for debt servicing, including TZS 6.49 trillion specifically for interest payments. This represents the highest debt service allocation in the five-year period, occurring within a total budget of TZS 56.49 trillion. External debt stands at USD 33.905 billion, with the government holding 76.4% of these obligations.

Domestic debt has grown to TZS 34.26 trillion as of March 2025, primarily held by commercial banks (29-33%) and pension funds (26.5-27.6%). The USD-dominated debt structure (67.7-68.1%) continues to pose exchange rate risks, particularly given the 2.6% depreciation of the Tanzanian Shilling in 2024/25.

Tanzania National Debt Service Costs (2021/22–2025/26)

Key Observations

1. Trend in Debt Service Costs: Debt service costs have increased steadily, from an estimated TZS 9–10 trillion in 2021/22 to TZS 9.1 trillion in 2022/23, TZS 10.48 trillion in 2023/24, an estimated TZS 11–12 trillion in 2024/25, and a confirmed TZS 14.22 trillion in 2025/26. This reflects growing borrowing, particularly external debt (73% of total debt in 2024), and larger budgets (TZS 44.4 trillion in 2022/23 to TZS 56.49 trillion in 2025/26). The 18–29% jump from 2024/25 to 2025/26 is driven by increased interest payments (TZS 6.49 trillion in 2025/26) and a higher debt stock.
2. Debt Composition: External debt, predominantly USD-denominated (67.7–68.1%), reached USD 33.905 billion in 2025, exposing Tanzania to exchange rate risks, with a 2.6% shilling depreciation in 2024/25 increasing repayment costs. Domestic debt, mainly Treasury bonds (78.9% in 2024), rose from an estimated TZS 22.17 trillion in 2021/22 to TZS 34.26 trillion in 2025/26, held primarily by commercial banks (29–33%) and pension funds (26.5–27.6%).
3. Sustainability: Tanzania’s debt-to-GDP ratio increased from 43.6% in 2021/22 to 47.36% in 2023/24, stabilizing at ~46% in 2024/25–2025/26, with a projected decline to 40.84% by 2029. The debt service-to-GNI ratio was 2.8915% in 2023, indicating moderate debt distress risk per IMF and World Bank analyses. However, reliance on non-concessional borrowing and USD exposure poses challenges, particularly with shilling depreciation.